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No lover of liberty can be anything but inspired by the Egyptian people’s peaceful toppling of the U.S.-armed and -financed dictator, Hosni Mubarak, last winter. The “pharaoh” is gone. Will another rise in his place? That is the question.

Mubarak’s exit followed on the heels of a similar change in neighboring Tunisia. Revolutionary fervor has been spreading across the Arab world, and it does one’s libertarian heart good. Seeing autocrats who have ruled for 30 years driven from power without a shot being fired by the people is something to behold. One fears, of course, that some regimes will not go as easily as Mubarak’s did. In Libya, Yemen, and Bahrain, government forces have fired on and murdered protesters. The U.S. government is patron to the rulers in all three countries, but it has turned on Libya’s strongman, Muammar Qaddafi, and led a coalition of nations in air strikes against his forces. There are also revolutionary stirrings in Jordan (another American client), Syria, and Iran.

The change taking place is discomfiting to America’s policy elite, which has needed autocracy in the Arab and Muslim world to carry out its agenda. Why is that so? From the end of World War II, when the United States picked up the colonial scepter from a broke and exhausted Great Britain, America’s ruling class have feared Arab nationalism and pan-Arab solidarity, as well as Iranian nonalignment. (Soviet influence was a secondary concern.) After World War I, Great Britain and France had set up a collection of client states and puppet monarchs to secure their economic interests. Now it was the United States’s turn to run the show.

By the 1960s the U.S. government had two primary objectives in the region: access to the massive oil reserves, seen as essential to America’s global hegemony, and, mostly for domestic political reasons, support for the state of Israel. The Arab people had reason to be concerned about both objectives. First, they thought they had gotten rid of the old colonial powers and they did not like a new group of foreigners manipulating their countries in order to obtain oil. They had been promised independence long before. When would that dream finally come true? Although their rulers were handsomely rewarded for cooperating with the U.S. government, the money rarely improved economic conditions in those poor countries, which suffered from brutal oppression and plutocratic cronyism.

Second, the people resented Israel because it was built largely on land belonging to their fellow Arabs, the Palestinians, through a United Nations procedure that was hard to interpret as anything but Western imperialism. (Most Zionist settlers were Europeans, the leadership of whom touted Israel as a regional outpost that would serve the interests of the Western powers.) The creation of Israel on more than half the land of Palestine in 1948 was the culmination of a long train of broken promises made to the Arabs by Great Britain, beginning with Lawrence of Arabia during World War I.

The upshot was that American policymakers could not trust the Arab people with democracy because they couldn’t be counted on to toe the imperial line. Today’s expressions of support for democracy by President Obama and Secretary of State Hillary Clinton ring hollow in light of that shameful history.

It is also important to know that the U.S. and British governments cultivated violent Islamist groups, such as the Muslim Brotherhood (before it renounced violence), whenever convenient. Both countries’ policymakers believed that secular, left-wing Arab nationalists, such as Egypt’s popular and charismatic Col. Gamal Abdel Nasser (who led a coup in 1952 against a British-backed monarch), could often best be countered by right-wing religious forces. Robert Dreyfuss, author of Devil’s Game, reports that British and U.S. intelligence agencies hoped the Muslim Brotherhood would assassinate Nasser. (They might have even lent a hand.) At other times, the Western powers supported the brutal repression of Islamists. Again, this history shines essential light on those American foreign-policy thinkers, most notably the neoconservatives, who express fear of the Muslim Brotherhood’s prominence in the new Egypt. (Israel followed the same path as the Americans and British some years ago when it nurtured Hamas among the Palestinians in the Occupied Territories as a way to dilute support for Yasser Arafat’s secular Fatah. Today Israel claims Hamas as its mortal enemy.)

During the three weeks of anti-Mubarak protests the U.S. government looked like a pitiful giant. Sometimes it appeared to side with the people in Tahrir (Liberation) Square. At other times it seemed to back Mubarak, or at least a gradual transition under the guidance of Omar Suleiman, Mubarak’s torturer-in-chief who was the American choice to succeed the old dictator. U.S. officials had come to know Suleiman well over the years — he was the CIA’s go-to guy when it needed a prisoner tortured. Egypt played a leading role in George W. Bush’s “extraordinary rendition” program after 9/11.The army in control

With U.S. client Mubarak gone, Egypt is now in a dangerous limbo. The army is in control, but the Egyptian people respect it, although the “emergency” law enacted in 1981 to crack down on government opponents is still on the books, despite the protesters’ demands. On the other hand, the despised security force was disbanded. Egyptians in March voted for a package of eight constitutional amendments, which had the support of the Muslim Brotherhood and Mubarak’s old National Democratic Party. The amendments, however, were opposed by the younger liberal opposition, which complained that the early referendum prevented it from organizing properly. Parliamentary elections are to be held in June, with a presidential election in August.

In the longer term, what will the army do? Will it guide the country to democracy? (That, of course, implies a list of questions of its own, such as, what limits would there be on government power?) Or will it produce another Mubarak?

In thinking about those questions, one must appreciate the full role of the Egyptian military. As the Times reported in February,

The Egyptian military defends the country, but it also runs day care centers and beach resorts. Its divisions make television sets, jeeps, washing machines, wooden furniture and olive oil, as well as bottled water under a brand reportedly named after a general’s daughter, Safi…. And some scholars, economists and business groups say it has already begun taking steps to protect the privileges of its gated economy, discouraging changes that some argue are crucial if Egypt is to emerge as a more stable, prosperous country.

In other words, the Egyptian economy is a military crony-capitalist state. Over the years top military people have gained fabulous wealth by controlling enterprises, factories, and tourist sites, and so have favored civilian businessmen, such as Ahmed Ezz, who controls the steel industry and who is a friend of Mubarak’s son Gamal. Government contracting has been a rich source of cash and corruption. A major source of this wealth is the American taxpayer, who is forced to send close to $2 billion in military and food assistance to the Egyptian regime every year.

Meanwhile, most Egyptians are pathetically poor, with nearly half the population living on less than $2 a day. Many are unemployed or underemployed and lacking prospects for improvement. Young people who cannot find jobs see the well-connected regime cronies driving nice cars and living well. No wonder the uprising was fueled as much by a desire for material improvement as by political ideals.

The army won’t be eager to give up its privileges. Field Marshal and Defense Minister Mohammed Tantawi, who is reported to be in charge now, is a known opponent of free-market reform, the Times reports. It quotes a former trade minister who says the army is smearing as corrupt people known to favor economic liberalization.

The sullied market

If we learn nothing else from Egypt, we must realize that the free-market cause has been badly sullied in such places, where the U.S. government and World Bank promote so-called liberalization that in fact turns out to be rank cronyism at the expense of the country’s population.

The Times wrote,

[The] idea of liberalizing the economy was thrown into disrepute because of the corrupt way that the Mubarak government carried out privatization, bestowing fortunes on a small circle around the ruling party while leaving most Egyptians struggling against grinding poverty and rampant inflation….

[The] Mubarak government carried out reforms from the top, without changing burdensome regulations that made it hard for small businesses to compete, and the benefits flowed mainly to a few. Most Egyptians felt, if anything, more impoverished, watching new Mercedeses and BMWs zip by donkey carts hauling garbage through the streets.

Mubarak’s predecessor, Anwar Sadat, also did his part to discredit liberalization by reducing food subsidies and lifting food price controls while leaving most crony privileges largely in place. Riots ensued.

That is how anti-free-market activists are made. “Some of the young revolutionaries at the vanguard of the revolt identify themselves as leftists or socialists,” the Times reports. The story quotes Abdel Fattah el-Gibaly, director of economic research at Al-Ahram Center for Political and Strategic Studies, who said, “People think that liberalization creates corruption. I think we will go back, not exactly to socialism, but maybe halfway.”

What a tragedy that will be for the mass of Egyptian people. Would they favor semi-state-socialism if they understood how radically “populist” the free-market philosophy really is — how it condemns all government privilege and interference with peaceful cooperation and exchange? Nothing is more revolutionary or liberating than the abolition of all government intervention that impedes or forbids competition, because free competition and the absence of legal barriers to self-employment maximize the market power of workers and raises the living standards of consumers. Taking control of the economy from the army and giving it to civilian bureaucrats would be no advancement at all. What Egypt, like all countries, needs, is radical liberalization, which means putting the economy directly into the hands of the people through control of their own labor and resources, both individually and through voluntary combinations.

To their credit, organizers of the Egyptian opposition appear to be keeping a close watch on the military rulers. We can only hope they keep the pressure on to lift the oppressive laws and to move away from autocracy. At least they have one thing going for them: they have already driven one dictator out of power just by pouring into the streets. That should give them courage for the future. It should also embolden others around the world.

This article originally appeared in the May 2011 edition of Freedom Daily. Subscribe to the print or email version of Freedom Daily.

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Sheldon Richman is former vice president and editor at The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State.
Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..."
Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics.
A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.

Reading List

Prepared by Richard M. Ebeling

Austrian economics is a distinctive approach to the discipline of economics that analyzes market forces without ever losing sight of the logic of individual human action. Two of the major Austrian economists in the 20th century have been Friedrich A. Hayek, who won the Nobel Prize in Economics, and Ludwig von Mises. Posted below is an Austrian Economics reading list prepared by Richard M. Ebeling, economics professor at Northwood University in Midland and former president of the Foundation for Economic Education and vice president of academic affairs at FFF.